Month: October 2013

I love my Uncle. He’s always been there for me and he is the best Uncle I could ever want.

But my Uncle has a serious problem.

You see, my Uncle is a bit of a dreamer, and in recent years every business he’s started has ended in failure. He’s articulate and bright, so he gets hired to run huge, multi-billion dollar businesses across the country. But each time, despite his good intentions, he always drives the business bankrupt.

So while my Uncle used to be rich, today my Uncle is bankrupt. Miraculously, he has held onto his businesses and continues to try to make them work. But his monthly bills on them are 150% more than his income! Sadly, he’s already tapped out everyone in our family to finance his debt. Each of us that is working owes about $150k to help him get out of debt.

The worst part is that my Uncle has stopped listening to the family. Because of his position, a lot of outsiders want to manipulate my Uncle, and they do so over and over again. This is probably what hurts his businesses most.

Obviously, this has been extremely stressful for our family – so much so that recently we’ve started fighting. Half of us want to cut my Uncle off and tell him “enough is enough!” But we all love my Uncle and so the other half really wants to see him succeed in his next endeavor. Since he won’t listen to us, some of us have stopped giving him his allowance, and now he’s really angry. He says that we promised him an allowance and that we have to keep giving it. But times are hard on all of us, and he’s making it worse.

And of course, as is typical with my Uncle every four years or so, he has a new business venture he wants to start. The business sounds great and he makes a compelling pitch for it. If it works it might help a lot of people! But my Uncle’s track record is so poor. He’s got so much debt and other problems, that we just have to say no. This is going to be a tough lesson for my poor Uncle, but he’s risking the financial security of the entire family now. We simply can’t allow him to ruin all of us.

So, Uncle Sam – God Bless you. I love you and always will. I hope you recover, but for now I have to cut you off. Once you have your existing businesses in order, we can talk again. But until then, I can’t help you take on more challenges. You need to finish what you start before you start more.

In the wake of the Silk Road bust this week, I think we’ll see some new thinking around Bitcoin. Contrary to popular belief, Bitcoin is not anonymous at all. It never was, and it never will be. It is probably the most public trading system ever created. This sounds scary, but unless you’re a criminal it’s not really.

For Dread Pirate Roberts, aka Ross Ulbright, it seemed anonymous. Until someone tied his zeroes and ones back to him. Now we know who he is, and the FBI busted him. Further, with the details of DPR’s bitcoin accounts in their possession, the FBI now knows everyone that he has ever transacted with. Ever. You can’t do that with cash! Every person that used silk road is a leaf in a tree called the bitcoin Blockchain.

The FBI will, if they have not already, trace these so-called anonymous Bitcoin accounts back to transactions at popular trading exchanges like Mt Gox, Coinbase, and Bitstamp. These exchanges, because they trade real money for bitcoin, know their user’s true identities. This will enable the government to get warrants for those exchanges to turn over those identities. I guarantee that the vast majority of Silk Road users did not have the technical savvy required to stay anonymous. They bought coins at these exchanges, then headed over to Silk Road. They shouldn’t have believed the anonymous hype – it’s just not true.

In other words, digital drug busts are a FBI agent’s wet dream. Every transaction ever done is public, and its just a matter of a half-dozen small search warrants to get to every user that ever used the Silk Road. Even if it takes them 10 years to bring down the kingpin drug dealer, they will be able to retroactively identify all of this customers.

So unless the operators of the exchanges have the bravery that Lavar Levinson of Lavabit has, these records will go to the FBI within a matter of days.

On one hand, this is terrible! It’s such an invasion of privacy. But on the other hand, is it? The law enforcement agents are doing exactly the same work they’ve always done, but this time its digital. We created these laws and we created these agencies. With digital currencies, they can do their job with incredible efficiency. The law-abiding citizen should be ecstatic – we could literally haul a million druggies to jail as soon as the paperwork is done.

I for one am glad that Silk Road is gone. It gave Bitcoin a bad name. I hope this bust goes far and wide and helps the government recognize that Bitcoin is an opportunity rather than an obstacle.